Inflation hits zero level

New Delhi: Declining prices of vegetables and fuel items pulled down the inflation to zero level in November, the lowest in about five-and-a-half years, exerting pressure on RBI to cut rates to boost growth. The Wholesale Price Index (WPI) based inflation was at 1.77 per cent in October and 7.52 per cent in November 2013.

As per the data released by government today, the WPI inflation remained flat mainly on account of falling prices of vegetables, especially onion, edible oil, petrol and diesel.

In view of the moderation in WPI inflation, which has been on declining trajectory for six months, the industry has stepped up its demand for a rate cut. The Reserve Bank has maintained a status quo in interest rate since January. The RBI factors in retail inflation while formulating its monetary policy.

In its policy earlier this month, RBI Governor Raghuram Rajan had hinted at a rate cut early next year if inflation continued to decline and government took steps to contain fiscal deficit.

Food inflation, which is on decline since May, fell to nearly three year low of 0.63 per cent.Inflation in fuel and power segment fell 4.91 per cent, the lowest level since 2009. This is probably the first time when WPI inflation has hit the exact zero level. The last time WPI was lower than this was (-)0.3 per cent in July 2009.

Onion price dropped 56.28 per cent as compared to a contraction of 59.77 per cent in October. In case of vegetables, the contraction was 28.57 per cent. Industry chamber Assocham in its reaction to WPI numbers made a strong pitch for an interest rate cut to boost demand for industrial goods and push economic growth.

Commenting on the data, Minister of State for Finance Jayant Sinha said global growth has been quite week and as a result inflation, not just in India but around the world is expected to be moderate.

“We obviously have to see how the RBI now deals with all of these factors. They of course are very vigilant in these matters. They are taking into account all of these and I am sure they will act at the right time,” he said.

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